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Vanguard founder John Bogle on tax fairness: "Rates may have to be changed, but we also need to...
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Thursday, December 22, 2011, 7:22 PM ETVanguard founder John Bogle on tax fairness: "Rates may have to be changed, but we also need to look at what is taxed, and how. Dividend income should be taxed at the same rate as ordinary income. As for capital gains, there ought to be some distinction between capital made by people who start businesses, and contribute value to society, and capital made by gamblers on Wall Street."
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This news story has 23 comments:
Gee, That would be great. I can't wait.
Thought we already had short vs long term cap gains rates.
Slippery slope. Have at it. The sheeple will accept anything I see.
Outlawing naked CDS would be a good place to start, then they could build from there, naked short-selling, HFT, pump and dump, short and distort, etc.
Dividends are income that has already been taxed once at the company level. A better reform would be to either
- let companies treat dividends like interest and get a tax deduction and then have them be taxed as regular income in the hands of investors
or
- only tax them up to the true corporate tax rate in the hands of investors. So if a company pays the full 35% tax rate - those dividends are "tax free" in the hands of investors - if a coman=ny pays 1% tax - the investor is taxed at the less of their marginal tax rate or 34%. This system is acutally in use in Australia and it works.
What you want in a tax system is efficiency and good incentives.
In either of these you reward companies who pay their taxes and you don't provide incentives to over leverage.
As for capital gains - you eliminate the need for this if if you tax consumption. A capital gain from the sale of a business or an investment represents capital that can be either reinvested or consumed. Taxing such gains at the time they are made means that people can be "frozen in place" - this is bad for capital mobility. Better to tax the gain as it is consumed this allows capital to flow more easily and promotes investment and saving.
Capital put to work that funds businesses and wealth creation is a good thing. Not a bad thing. You want more of it not less. Anything that chases it away or reduces the incentives is generally a bad thing.
E
> a good thing.
I think you're missing a big part of Bogle's point.
Let me fix your statement for you:
Capital put to work that funds businesses and REAL VALUE creation is a good thing.
There, now it makes sense. :)
in his world there is good productive investment and bad unproductiive investment - who decides this? this is just qualitative waffle.
there is one capital that earns a return and capital which does not. the rest is garbage thinking.
if that money is invested directly in a pizza parlor or in a financial instrument that provides liquidity that ultimately enables the pizza parlor to be built - it just does not matter. money is money and it flows to where it generates the best return.
E
I totally agree.
Do agree with Tom Armstead that some transactions should be banned however.
So long as something is "legal" Gov't should not be assessing any variable taxes based on it's opinion of morality or socially worthiness.
It is the thin end of the wedge.
What is moral or "fair" has no place in this. It is either legal or illegal - and the standards need to be applied according to the rule of law not taste or public opinion. Once you go that route you end up in Venezuela.
E
Unless, of course, that new business is named Solyndra.
This is probably the one point in his article that is doable and won't have an army of my compatriots seeking the loopholes. Otherwise we're just adding more complexity to a code that no one has understood since Wilbur Mills.
Other than advocating for higher taxes on dividend, it sounds like the man is more or less for status quo---he just makes it sound as if he isn't.
Do as I say, not as I do.
Likely have a lot of tax accountants UE.
Still plenty of work as the I.R.S. will just issue new report requirements to keep their own people looking busy and business will have to respond with more useless paper.